You are here: Home » Shorts and Humour » Graphic of The Day – Regional Relative Performance of Long/Short Managers

Graphic of The Day – Regional Relative Performance of Long/Short Managers

onAugust 16, 2013

By Simon Kerr, Publisher of Hedge Fund Insight

The returns of equity long/short managers are under examination here, and how the managers have performed relative to their regional indices. It is no surprise that European long/short managers have produced returns year to date closely in line with the STOXX Index – the aggregate stock selection alpha in Europe tends to add value on top of the net exposure return – and indeed European equity managers were ahead of the local index until recently. It is more of a positive change that Asia long/short managers have produced very competitive returns in aggregate relative to local and regional indices. Even leaving aside the liquidity-pushed returns from managers of Japanese equities, Asia equity managers have added value from the bottom up in the YTD.

It is much less easy to be sweeping about returns from American equity long/short managers versus the S&P’s excellent returns this year. In part this is because the retracements in US equities this year did not offer as much of an opportunity to re-load or trade as in European stock markets.

The other factors are the efficiency of the North American markets, the size of hedge funds in the U.S. versus their local markets, and the law of large numbers. With so many equity hedge fund managers in the United States, in aggregate they have a representativeness as market participants that hedge fund managers in Europe and Asia don’t have.

That written, Asia and European equity hedge fund managers have added good value this year, and justify allocations from investors on that recent evidence, as well as the long-to-medium term basis. Like a club owner looking at a football manager, quite often in hedge fund land the question asked is “what have you done for me lately?”, and the current answer for equity hedge managers is “more than enough” for Asian and European ones.